Nurturing existing customers may seem like a lost art, especially for small-business owners. Still, data from a study released Wednesday reveals many have begun to change their ways.
The joint study from BIA/Kelsey and Manta found that small-business owners finally grasp the impact existing or lifelong customers have on their business. More small business owners now invest time, money and resources in strengthening relationships with existing customers. In fact, they spend more than half of their time and budget, per the study "Achieving Big Customer Loyalty in a Small Business World," which surveyed nearly 1,000 small business owners.
Some 61% report that more than half of their annual revenue comes from repeat customers, rather than new customers, and that a repeat customer spends 67% more than a new customer.
Only 14% spend the majority of their annual marketing budget to acquire new customers, and 20% invest most of their time and effort to acquire new customers.
Despite some shift in behavior by small-business owners, not many take advantage of their customer relationships. Few small businesses have a loyalty program, only 34%, and those who do offer what the study calls "an unsophisticated experience" that owners largely manage offline. Owners don't take advantage of technology that would give them deeper insight into their customer base. Many understand the value of building a long-lasting relationship with customers, but most lack a clear strategy to connect and drive repeat sales.
When asked about the purpose of their customer loyalty program, about 30% of those with one said they want to "improve customer relationships" and 36% said they use it to "grow revenue." But without tools such as CRM systems or automated programs to achieve deeper insights into their customer base, retaining customers and growing lifetime value remains challenging.
The study also makes recommendations to build better relationships with customers. It suggests building a loyalty program based on the desired outcome. Create an opt-in option. Go mobile, don't forget about social, and automate processes. Keep consumer engaged with the site and its content.
Finally, structure the company's loyalty program to generate a positive return on investment. Make a list of multiple options that will help to achieve certain goals and determine how much it will cost and the amount the company will net in returns.